The four times levered EFSF package and insurance scheme of two months has been gradually fading from view and any remaining hopes probably subsided with S&P's negatiive credit rating watch listing on the EFSF yesterday following the previous night's negative rating watches on 15 EU sovereigns. This potential bailout plan was huge news at the time. Since then we've had speculation about Chinese/EM involvement, the IMF, ECB loans to the IMF, bilateral agreements, creating a central financial authority, joint Euro-area bonds, AAA-only ‘Elite Bonds’, making the EFSF a bank, making the EFSF co-invest in a SPV that could access ECB liquidity, using the EIB as a SPV, the Fed being involved, ongoing debates about the role of the ECB and now a slow march towards treaty changes. If we've left any out please let us know.

As analysts Andrew Benito and Huw Pill, there's still a major area of disagreement between Merkel and Sarkozy on the essence of what Europe is going to look like.Our bottom line is the following: the ‘clean’ solutions that would have seen clear resolution of that impasse appear to have been ruled out following Monday’s German/French meeting. That makes something altogether fuzzier likely to emerge from Friday, and this risks falling short of market expectations. The sequencing that we believe is being followed will be delayed further into the new year.

"Anyone who wants to sell you overnight success or wealth is not interested in your success; they are interested in your money."

-- Bo Bennett

The early action is fairly quiet this morning, which is a change after five sizable gaps in the last eight days of trading. This inclination toward strong overnight action has produced a stunning gain of 8.32% in a very short period of time, but it isn't nearly as easy as it sounds.

What has made trading very tricky is that intraday there has actually been a net loss over the past seven days. If you bought the SPDR S&P 500 ETF (SPY) at the open each day and sold it at the close, you actually lost $0.13, while those who bought SPY at the close and sold the open the next morning made over $10.00. In other words, daytraders who go to cash every night have been completely shut out of the vast majority of this powerful action.

That combined with the lack of any hot areas of momentum action is why I'm hearing so much moaning and groaning from traders lately. Many traders aren't carrying much exposure overnight because they are concerned about the news risk out of Europe and don't want to be caught by a surprise negative open, and then they just don't have many opportunities once trading starts for the day.

This overnight caution is understandable, but the problem is that all the news out of Europe has been positive lately and the market continues to be optimistic that more good news is likely to emerge in the next couple days. The ECB meets on Thursday and is expected to cut interest rates. After that another European summit meeting is taking place on Friday, and there is a wide range of expectations about what may emerge.

The last three summit meetings have ultimately disappointed, so the opportunity for some sell-the-news action is quite high, especially given how much we have run. This market has been very tough on the bears lately, however, and they are going to be gun shy. The big problem for the bulls is that there seems to be growing complacency that Europe is really saved this time. That greatly increases the risk for some sudden downside. The fact that we have quite a few frustrated bulls who have been underinvested during this move increases the opportunity for volatility as more European news hits.

I've been maintaining a generally bullish bias for a couple weeks now mainly because it was my view that too many market players were not well-positioned for upside and too many were struggling to produce performance to catch up with benchmark indices. Positive seasonality was an added boost. I'm now looking for a bit more choppiness in the near term, but I don't expect it to be easy to trade.

Typically, when the market goes up over 8% in seven days, it means there has been a rush to buy so there no longer is this poor positioning to drive things. As I discussed above, this rally has been unusual, however, as all the gains have come overnight. As a consequence, many market players never gained the type of exposure that they would have liked, and many are still hungry to buy dips. That is likely to keep some bids under this market and I'm not expecting any major trend shift soon. It has also been a very tough year for many hedge funds and aggressive money managers, and they are going to be watching for chances to get in and catch up.

At this point, I'm trying to be cute and catch a little downside in the short term. Knocking out quick intraday trades has been extremely hard because of the lack of intraday movement, but I'm hopeful that as we move beyond Europe next week, we'll have more natural chart development that will allow some longer holding periods.

I'm looking for another fairly quiet day today as we await European news the next couple days. There should be a little pushing and shoving for positioning in front of the news, and my short-term thesis is that some may anticipate a sell-the-news reaction and give us some near-term weakness. I'm looking for a trade there and, of course, will continue to seek out good individual charts as well.

Netflix showing relative strength off the open following the House passage of an amended Video Privacy Protection Act late yesterday that allows Netflix (NFLX) customers to post and share rental info on social media sites like Facebook